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Chapter 11 for GM - Why Not?

It's been very interesting to watch this whole GM dance play out. It appeared obvious to everyone pretty early on that Chapter 11 was an option - and maybe the preferred option - for GM. But CEO Rick Wagoner has stood firm against it -- until yesterday, that is. As the Wall Street Journalreported yesterday, Wagoner "said a bankruptcy filing 'puts things out of the control of the board and management.' But Mr. Wagoner also said bankruptcy 'could work but it might not work,'" whatever the hell that means. But it was seen as a sign that he might be warming to the idea. Something about the sight of the gallows, apparently. Wagoner often cites the effect on shareholders, customers and suppliers in describing why he doesn't want to go down this path, thus omitting the real reason why he doesn't want to declare Chapter 11.

Since the object of Chapter 11 is to allow a company to reorganize -- and ultimately to emerge from Chapter 11 -- among other powers, it allows the court to abrogate all the labor agreements and start from scratch. So the UAW -- joined by their amen chorus in the Obama Administration -- have been stiffening Wagoner's spine. Since his allies are few and far between, he has thus far been compliant in parroting the UAW party line that bankruptcy would be bad for GM.

In fact, it may be the only thing that saves them.


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This page contains a single entry from the blog posted on March 19, 2009 8:13 AM.

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